Iran War: Outlook for the Indian Stock Market

First Things First

Yes, our markets will fall. Some people will panic but most of those people will regret it in a few weeks.

The source of the concern in India is not the war itself but rising crude oil prices.

But India's oil story is not at all as scary as is sounds in the media.

Yes, India imports 87% of its crude and that sounds scary in the current scenario but the fundamental context is different.

Our electricity grid runs almost entirely on coal and solar. So, power costs will not spike if oil goes up 15-20%.

The real pain point is transport and logistics - diesel for trucks, jet fuel for airlines - which feeds through into freight costs. This brings about the much dreaded inflation, although with a lag.

Don't Worry, India Will be Fine

We need to appreciate that the Indian government over the years has been smart about this. We have bought Russian crude oil at a steep discount for about three years and have saving roughly US$ 25 bn a year in the process.

Yes, the tariff drama with the US forced us to cut Russian imports from nearly 50% of our total crude imports down to around 21% by early 2026, with Saudi Arabia filling much of that gap.

But here is the thing, even after all that tantrums, India is still buying 800,000 to 1 million barrels a day from Russia at a discount and the US Supreme Court just struck down Trump's broad tariff powers which gives us more negotiating room going forward.

The buffer is smaller than 2023 but it still exists and we are nowhere near the painful situation of 2008 when we were paying full market rate for every barrel with no cushion.

Think about the Ukraine War, four years in now. The world's biggest wheat exporter shut down overnight. That felt catastrophic but India exported 5x the wheat in 2022 alone to fill the gap.

What I want to emphasise here is that everything has a solution.

Lessons From History

The Israel Iran war in June 2025 lasted for 12-13 days we had screaming noises everywhere in financial markets. But then the Nifty rallied 15% in the months after. Sadly, the people who sold that panic are still waiting to buy back cheaper.

Every major geopolitical shock of the last 30 years has knocked markets down 5-15% in a kneejerk fashion.

But the recovery always comes faster than anyone expects... sometimes in a few days, sometimes in a few months, but it always comes.

In February 2022, when Russia attacked Ukraine, the Sensex fell 8% but it was back to all-time highs in just 45 days.

During the Gulf War in 1991, oil surged 30% and Indian markets still recovered 25% within 3 months.

During the Kargil War in 1999 the Sensex was down 12% but then rose 40% over the next 12 months.

Think back to the global financial crisis of 2008. The Nifty collapsed 50% and then 2009 delivered 80% from the bottom...and kept rising in 2010. The investors who just stayed put built some of the most solid wealth of their lives.

When Russia attacked Crimea, Ukraine, in 2014, global markets fell 5-7% but recovered in just 20 days.

During the India China border clash in 2020, the Nifty fell 7%. The world was in the grip of Covid back then too. Over the next 2 years, the Nifty went up 100%.

Conclusion

In times of fear, markets fall... but then the recovery is faster than anyone expects and new highs follow. This is a universal pattern in markets.

Midcaps and smallcaps have historically delivered 15-20% gains in the quarters right after these shocks pass. This is exactly where real wealth gets built in India.

All we have to do is simply keep holding quality businesses and not panic when news channels are going completely crazy.

The next few days will be very noisy and scary but the week after could be calmer. Two months later, this will look like every other year on this long term chart.

All we can do is stay disciplined and deploy our capital intelligently, as always.

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